A Look At The 70-20-10 Budgeting Strategy

Budgeting is crucial to being financially healthy. It is wise to know ahead of time how much of your income is going to be diverted to specific aspects of your life. One way to stay on top of your budgeting is to follow a specific budgeting plan and place your funds in accordance. This should not only provide you security in your decision-making but also help you invest. One budgeting strategy you could try is the 70-20-10 formula. 

70%

The 70% section of this strategy will involve 70% of your monthly income being directed to essential purchases and monthly bills such as rent, power, cell phones, gas, groceries, insurance, and credit card minimums. This will ensure that your most basic costs are covered through the month. This does not include nonessential bills such as your Netflix or Amazon Prime accounts, as the point of budgeting is to help you determine what you need and don’t need to be spending on. 

20%

The 20% section of this strategy includes a pool of money set aside for leisure and entertainment. It also includes money for your more nonessential subscriptions and purchases. This is perhaps the most important section as it will give you an idea of what you must work on within the area that often is responsible for the most reckless spending. It also should give you the opportunity to plan some of your monthly events out ahead of time. 

10%

The final 10% of your monthly income should be diverted to investments. This can include anything that you feel confident in, but for the most security, I would recommend investing this into low-risk assets that are almost sure to go up with time such as placing it in a high-yield savings account, in index funds, or in stocks that return a dividend.